SAP Accused of Inflating HANA Growth Numbers

How big is SAP’s newish HANA hardware appliance business? If you take the German software giant’s word for it, it’s a young but fast-growing line. But at least one analyst isn’t buying it.

In a research note to clients today, analyst Peter Goldmacher of Cowen and Co. essentially accused SAP, the $21 billion (2012 sales) business software giant, of arbitrarily assigning revenue from other lines of business to HANA to make it seem as though it is growing faster than it is.

“If we take management at its word and believe that HANA’s two-year license growth [rate] through FY13 is about 120 percent, then this means that the other 90 percent of SAP’s license business, Apps and BI, is growing at … roughly 2 percent, materially below category growth rates,” Goldmacher wrote. “Our research and experience lead us to believe that SAP is allocating product revenue subjectively and that this is resulting in an inflated HANA growth rate. This could give the appearance of market momentum that doesn’t yet exist.”

That’s an important point, he argues, because HANA, a hardware appliance that runs several SAP business applications, is central to the bullish case that SAP shares are a good buy right now. “This could give the appearance of market momentum that doesn’t yet exist,” Goldmacher wrote. Incidentally, SAP doesn’t fully break out all the details in all the software markets it plays in.

So how is SAP supposedly doing this? Discounts. Large discounts on apps and business intelligence products coupled with no discounts on database and mobile products have the effect, Goldmacher argues, of making it look as though the database and mobile products are growing faster than they are. “Absent the uneven application of discounts by product, the database and mobile businesses are materially lower growth businesses and investors are overly confident in the ability of these two product lines to impact the model in the near to intermediate term,” he wrote.

I asked SAP spokesman Jim Dever about all this. He said that no such discounting is taking place. “We believe in the value of HANA, have priced it competitively, and do not discount it,” he told me today. “We have been consistent in our HANA pricing, our no-discount policy, and our reporting of growth rates and revenue results, and we have no changes to announce.”

For the record, SAP said it expects to see sales growth in the range of 11 percent to 13 percent in software and software-related services and 14 percent to 20 percent in its software and cloud subscriptions. The company next reports earnings on April 19.

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